tv Nightly Business Report PBS January 14, 2015 1:00am-1:31am PST
report" with tyler mathisen and sue herera. rally falls apart. a 280 point gain in the dow jones industrial average evaporates. what's behind one of the biggest downward swings for the blue chip index in years. payday. new reports show late wages are rising yes, rising along with job openings. has the missing piece of the labor market tussle been found? cashback? is apple ready to give billions back to shareholders in the form of dividends and buybacks? we'll speak to the analyst who says "yes." all that and more tonight for "nightly business report" on tuesday, january 13. >> good evening, everyone and welcome. if all you looked at today were the closing numbers on wall street then you really really
missed it. the dow ended with a piddling 0.2% decline. not much at all. but between the bells, it swung. 425 points from peak to troll in a wide volatile trading session. at one point, up 282. at another, down 143. for the first time since 2009 the dow moved from being up 1.6% to ending negative on the day. pick your reasons for the volatility. the bull's earnings report yesterday. some solid chinese trade but then the bears took over on trouble technicals. word that germany may be bulking by europe's central bank and of course oil. it resumed its problematic slide today as brent crude briefly traded at parody with domestic oil. here's how the major averages ended the day and again, those numbers deceived. the dow closed 25 points lower
and nasdaq 3 and s&p 500 off by a mere 5 points. u.s. oil closed 18 cents lower at $45.89 a barrel and actually it turned positive in afterhours trading for a while. brandt closed at $46.59 a barrel. in the bond market the yield on the benchmark ten year note dipped below 1.9% before closing really right at that level. so what happened? what caused the huge reversal in stocks today? bob pisani looks for some answers. >> reporter: what a day. whew. at one point, the dow up over 280 points and then in the early afternoon, it was down 140 points and it ended down about 27. what happened? there were a series of zpoimts right after the open. first, energy stocks a drag on the market and then a decent earnings report turned negative early on and then 11:30 a.m. kb
home gave disappointing commentary for 2015 and the whole home building complex fell apart. home builders had been leaders until today. in the early afternoon, there were a serious of very quick dow moves saw move 150 points down in an hour. that's a big move for an hour. indicates that the market is starting to price in more risks and a potential earnings slowdown. one thing to watch is the poor performance of financials. which were among the first sectors to drop off today. we go into earnings report for big banks this week and it' fairly common to sell off into those reports. bank of america, pnc, climerica and sun trust, all report earnings this week. for "nightly business report," i'm bob pisani at the new york stock exchange. and we'll have much more on what to expect from those bank earnings a little bit later in the program. despite today's stock market program, good news about jobs and wage growth in particular. the latest survey from the
national federation of independent businesses found that optimism among small business owners is now at an 8 year high. and that more owners plan to hire more workers and increase their wages. the labor department also had encouraging news in november. employers advertised the most job openings in almost 14 years. nearly 5 million posted jobs looking to be filled. health insurance giant etna doing its part for wage growth. company increasing minimum wage for employees to $16 an hour. the move will boost the pay of nearly 6,000 workers with some seeing a raise of 33%. >> will all these signs translate into wage growth? let's find out from mark sandy, chief analyst with moody's. let's start with the wage growth. one assumes when you start to
get wage growth, it means the economy is on much more solid footing. is that what is happening here? >> well, wage growth has been about 2% really since recessions for most of the economic recovery. we haven't seen an acceleration a meaningful acceleration yet but all the ingredients are coming together for a pickup in wage growth i anticipate that we'll see that in the next few months. certainly this time next year wage growth substantially higher than last year. >> why, mark did the number in the labor department employment report out last friday come in negative that there wasn't much if any wage growth in the most recent month, it was something everybody seemed frantic about on friday? >> yeah it's a puzzle tyler. i'm not really sure. i don't believe it. i think the data will be revised. there's a lot of technical measurement issues. the month of december is particularly squirrely. so i would just throw it out. i just don't believe it.
i don't think wage growth is decelerating. i think the numbers on friday aren't telling the true story of what's going on. >> mark, does this change the fed's timetable for moving up interest rates or because it's not necessarily a trend, does it pa on the fed? >> i think the fed is really focused anticipate in the next few months, by mid this year would raise interest rates. i think that's consistent with what they're thinking. if i'm wrong, then i think the federal reserve will delay the rate hike until later in the year. it's a key necessary condition is rising accelerating wage growth. until we getthat i don't think they will raise rates. >> why has the fed been slow in recent years and why now it's going to pick up?
>> well we have a lot of slack in labor market. the unemployment rate peaked 10% late in 2009 early 2010. it's been declining ever since, but it's still not back to full employment. 5.6% 5.6% much lower than it was. but close torer to a 5% unemployment rate. we are creating a lot of jobs. we created 3 million last year. that slack will be absorbed by this time next year. 5% unemployment rate that is full employment and we'll get wage growth. if history is any guide, by this time next year we should have a substantiative pick-up and fed should be tightening interest rates. here's something you don't often hear often. a budget surplus. it may long be one month, september, but the treasury posted a $2 billion surplus.
don't strike up the band just yet but puts the budget short fall 2014 under a half trillion dollars before president obama took office. a stronger u.s. economy and tumbling energy prices may not be enough to help economies and emerging markets. the world bank lowered outlook for global growth this year to just 3% from an earlier forecast of 3.4%. here in the u.s. the world bank increased its growth outlook for 2015 to 3.2%. now to earnings after the bell from the railroad giant, csx, fourth quarter profits of 49 cents a share were right in line with analysts forecast. how about those analysts? slightly beating estimates by 11%, jumping coal ship as well as gains in modal and merchandise shipping. company said it sees double digit growth in 2015 and that sends shares initially higher in
late trading, but the big issue for csx and other railroad operators is the sharp drop in oil prices. morgan brennan explains of pros and cons for railroad operators making this railroad season especially important. >> first quarter earnings should continue to be very healthy. if for no other reason the weather so far has been mild at least, relative to last year's miserable winter. so they have easy comps. >> reporter: and however, there are three major ways railroad operators could feel the effects of prices and the first is oil shipments. a fast growing business since the fracking boost started, surged more than 2,000% since 2006. so far, those volumes are still increasing. what may slow down this year is the volume of fracking materials like sand and steel. as new oil production begins to ebb. still, analysts note this is just a fraction of overall rail traffic. the second factor?
cheaper fuel. one of the biggest costs for operators. >> the largest consumer of diesel fuel in north america is in the pacific. so we'll see diesel fuel costs fall that will certainly help their financial statements. they're also collecting fuel surcharges on last month's price of fuel. so that helps the yield that's still good cost is down. that should boost profitability in the current quarter and the next couple of quarters. >> reporter: lower diesel prices make trucking more competitive and that could put some intermodal business from road to rail. third, natural gas tumbled as well and that could tap down demand for coal that experienced something of a rebound as utilities restocked the supply after last winter's harsh weather. that could create a head wind since coal, despite the large slide, is one of the biggest businesses for the railroad. the economy will mean more goods moving across from autos to
building material to food. while plunging energy prices could impact this industry experts say the railroads are still on track. for "nightly business report," i'm morgan brennan. well earnings season will really heat up this week as the big banks post their latest results. tomorrow wells fargo and jp morgan expect to record their numbers and later, bank of america, city group and goldman sachs. kayla tausche is with us to talk about what they're looking for because financials are key going forward. >> they're the barometer of the overall economy too. it appears the fourth quarter will show a tale of two businesses. one side the main street facing businesses of wall street that are going to do really well. lower oil prices and continued interest rates helps demand for loans, consumer spen up and people use the money to pay off bills. ironically the wall street side of the business trading activity some of the ipo activity and some of the more high finance areas of the business won't do so well
because of the various macroeconomic parts that affect it. >> i thought trading was pretty -- the big volume in the stock market last year. not as much volatility but certainly a lot this year. why is trading suffering? >> you would think more volatility means more volume in the market and it does but what executives have been saying as recently as last month is that a lot of the trading has become electronic trading. more each quarter and they don't make as much off of that. it's cheaper for the traders to execute but not as much revenue for the bank. >> the margins aren't as good. >> exactly. >> what about the low interest rate environment? that hant helped them either. >> no it hasn't. everybody thought in 2014 that would be the year that if we didn't see the fed raise interest rates, that would be the year at least yields would start going up and they would make more money off of loans they were making to borrowers. that didn't happen. so they're really pinning all hopes on 2015 as a year where interest rates and yields rise
and their overall business model. >> are the big bank's legal problems behind them? >> you read my mind. city group as of last month is taking $2.7 billion legal charge related to alleged manipulation of currencies and benchmark interest rates but city is not alone alone. they're the only bank that preannounced them. we could see the big ticket items. it's just become impossible to predict. >> kayla, thank you so much. appreciate it. what is apple going to do with all of its cash? you could buy iphones for everyone. >> everybody. >> everyone. the analyst, something shareholders want to pay close attention to. we'll talk to that analyst next.
some bad news coming into focus for go pro. apple is patented a camera for surf boards and other sports skier, just like go pros. with the iphone maker planning to take action go pro tumbled full 12% on the trading session. it was a different story, sue, for apple. our next guest helped put shares up nearly 1% from neutral to outperform today. thinks apple will announce new $200 billion plan to buy back shares and raise its dividend and maybe do it as soon as april. the iphone 6 sales continue to push the stock higher he says. bender managing director and global communication analyst at
credit suites. thank you for being with us. what makes you think, apple that's already returned so much capital to shareholders is going for even bigger slug of it? >> well, a few things i think are worth consid arrive in april 2015. with what we think is about $140 billion of net cash. now, that's more net cash than apple has at that stage than when they first implemented capital return program and that's about $100 billion and excessive now, after the business is fundamentally solid, this company is producing a sustainable $50 billion of precash flow a year. now is the time on the three anniversary, the final year of the capital return program. what we think they'll do is return about $200 billion to shareholders over the subsequent 2.5 years with the major cash return going forward. >> they're really staggering
numbers when you think about them. you think sales is one of the way to be moving forward, specifically the iphone 6 and ante up for the more expensive stwrergs. >> yes, one of the things we see is not just the return but thinking of the next current year iphone volumes well above 200 million units growing 20% and we see a mix of apple business to higher capacity storage devices and the 64 gigabyte and also more demand for the iphone 6 plus. given apple is premium in terms of selling prices that means gross profit dollar growth in the iphone business could expand by $18 billion over the next year or 40%. >> boy, that is just an amazing forecast there. what is your price target on this stock? >> our price target is $130. it would highlight that could even prove conservative as we don't have a scale in gross margins. we've got relatively conservative estimates for the
apple launch and additionally don't assume they'll announce new services over the medium is likely. >> you're underestimating compared to the street anyway the sales of the other devices, the watches and the like. perhaps you get a surprise on the upside out of that. >> yeah i think as we go over the course of this year and next year we'll see that. the $10 eps power could in fact prove conservative. >> all right, thank you very much for being with us tonight. we appreciate your time. >> thank you. >> cole mindergarcher with suites. a systemically important financial institution or too big to fail. means it's subject to stricter guidelines from federal overseers. metlife file a lawsuit to overturn the ruling and the ceo explained why. >> we think it's the right thing
to do to appeal the decision under dodd frank for the benefit of our consumerles shareholders and stake holders. >> we believe our action could and is likely to lead to higher cost for middle class consumers of insurance product without any additional safety provided to the system. >> shares still fell better than 1% to $49.81: . a rough day for kb home. fourth quarter revenue actually came in better than expected. still, kb saw shares plunge 16% and the others like toll brothers all fell in sympathy. the state of california is looking to suspend ai quinn. the state said they failed to turn over documents with the homeowner protection laws but aw
quinn said they cooperated. they said they haven't been responding to its request. before the close, shares down by 36%. $7.78. good year tire hit a few bumps in the road in 2014. the company had to lower the dollar demand weakness in europe and warmer than expected. fewer snow tourires i guess. today, the competition heating up now once again between boeing and airbus. boeing managed to top airbus in deliveries to customers for the third year in a row this year but airbus flew ahead in the number of future orders. shares of boeing up a fraction. $131.17 was the close there. airbus trades over in europe. and shares of amazon were higher than news that the company snagged wood di allen to write and direct his firs tv series and upgraded the stock to
buy, citing strong revenue growth and kbroouing margins. shares of amazon up more than 1% to 74. kind of seems like the holidays just ended but despite strong sales, retailers are already assessing how the u.s. consumer is doing as we head into this new year. courtney reagan has more. >> reporter: as retail resets for 2015 the big focus is the state of the consumer. >> every year is a challenge, but i am thinking again, more optimistically and hopefully we'll leave in the year with more money in the bank than the year prior. >> reporter: the national retail federation's annual big show former federal reserve chairman ben bernanke said while many face financial pressures, he hasn't seen the economic backdrop for the consumers this strong in almost a decade. here at the icr exchange conference in orlando, companies from restaurants to retail are
feeling good about the u.s. consumer fueled in part by lower prices at the pump which estimates could put an additional $800 on average back in consumer's pockets this year. >> consumer confidence. lower gas prices, having disposable income that's greater than the monthly budget. >> reporter: the enthusiasm isn't without caution. >> big challenge for the finish over the last couple of months but we'll be back strong. we focus on product and we focus on the customer. >> reporter: not all consumers are feeling flush. forcing retailers to work even harder. >> it's going to stagger along. people make money on the stock market and the cn man isn't doing much better because those family wage jobs are gone. >> there's also continued concerns of what the future is going to be.
really the way we have to think as retailers, is the consumer is going to and get some incremental income, how are you going to be the person to spend it with? >> making sure. >> reporter: easier said than done for most retailers: i'm courtney reagan. coming up, all in the family. the one thing most family run small businesses need but don't have. that
help for foreign workers hoping to get jobs in the u.s. warren hatch of utah introduced a bipartisan bill today that would increase the high-tech work visas issued and loosen restrictions on u.s. firms looking to hire foreign specialists in science, tech and engineering jobs. the nation's largest public pension fund a little crowing tonight about how far its funding levels have improved since the financial crisis back in '08. kal perse, the california public employee retirement system said it significantly improved in 2014 as surpassed $300 billion under management for the first time ever. and finally tonight, a look at succession plan at family run businesses and the surprising numberd pops that don't have one. so how can those owners keep those businesses all in the family? kate rogers has more. >> reporter: dennis started his
business winery in napa valley in 1982 and continues the run the show into his golden years. daughter suzanne, one day will take over the reins but like many parents, the former accountant isn't quite ready to let go. >> i'll slow down. i'm 72 years old now and i like what i do and my daughter hasn't asked me to leave yet. >> reporter: he doesn't have a formal succession plan but is unique. from price water house coopers finds nearly 75% of family owned businesses don't have a succession plan for senior physicians in their company. what's more e nearly 60% stay on longer than planned to ensure a smooth transition. sticky baton syndrome. >> there's tendencies of previous generation or current leaders to kind of hold on or maybe continue to have
influence. maybe on the money or wealth side but i think more of the emotional side. >> reporter: according to u.s. a, one-third of small businesses are family owned or operated. mom and pops are decidely operated and 79% telling pwc over the next five years. not just family businesses feeling optimistic the federation of independent businesses hit the highest level today since october of 2006. with more businesses planning to make capital outlays higher and expand. echoes that sunny outlook saying the wine business has been on a tear post recession thanks to a more upbeat consumer. it's so good heading into leave. >> it's the best thing i've done in my life and i love it. >> reporter: for "nightly business report," i'm kate rogers. that's a great job. >> pretty part of the country.
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